Alaska Airlines and Horizon Air 2014 Annual Report Download - page 134
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Variable Incentive Pay
Variable incentive pay expense increased from $88 million in 2012 to $105 million in 2013. The
increase is due to actual results exceeding our target results of financial and operational performance
more so than in the prior year.
Aircraft Fuel
Aircraft fuel expense increased $8 million, or 1% compared to 2012. The elements of the change are
illustrated in the following table:
Twelve Months Ended December 31,
2013 2012
(in millions, except for per gallon amounts) Dollars Cost/Gal Dollars Cost/Gal
Raw or “into-plane” fuel cost $ 1,423 $ 3.19 $ 1,397 $ 3.31
Gains on settled hedges 52 0.11 24 0.06
Consolidated economic fuel expense $ 1,475 $ 3.30 $ 1,421 $ 3.37
Mark-to-mark fuel hedge adjustments (8) (0.02) 38 0.09
GAAP fuel expense $ 1,467 $ 3.28 $ 1,459 $ 3.46
Fuel gallons 447 422
Fuel gallons consumed increased 5.9% in line with the increase in departures and capacity.
The raw fuel price per gallon decreased 3.6% as a result of lower West Coast jet fuel prices. The
decrease in raw fuel price per gallon during 2013 was due to a decline in refining margins of 27%,
offset by the increase in average crude oil prices of 4%, as compared to the prior year.
Losses recognized for hedges that settled during the year were $52 million in 2013, compared to
losses of $24 million in 2012. These amounts represent the cash received, or paid, net of the premium
expense recognized for those hedges.
Aircraft Maintenance
Aircraft maintenance increased by $25 million, or 11%, compared to the prior year, primarily due to a
$14 million increase in lease return provisions. During the year we modified one of our power-by-the-
hour agreements and terminated another related to our B737 fleet, resulting in a decrease in expense
under those agreements but an increase in engine events and related expense that we are now
responsible for. For our B737 and Q400 fleets, we also experienced heavier, more expensive checks,
on flat volumes.
Landing Fees and Other Rentals
Landing fees and other rentals increased $19 million, or 8%, primarily due to the increase in rates from
the Port of Seattle lease signed in late 2013. Additionally, we experienced increased rates throughout
our network with increased departures and passengers.
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